01/13/2023
9 BEST TIPS TO PREPARE FOR YOUR TAX SEASON (part 2/3)
4. Figure out your cost basis
If you sold stocks, bonds, or other securities in 2022, you will need to know the cost basis, or what you paid, to calculate any gain or loss on the sale. Before 2011, brokers were not required to report cost basis to the IRS so they may not have records of what you paid, requiring you to collect this information. If you don’t use a broker, you are responsible for figuring out your cost basis.
If you sold a home, you want to compute your purchase price and any improvements to determine if you need to report a capital gain. Up to $250,000 of the gain on a home sale can be excluded for single filers and up to $500,000 for those filing joint returns. Even if the home sale falls below those amounts, the sales transaction needs to be reported to the IRS.
5. Track down missing documents
While many documents will be pushed to you automatically, others will require you to be proactive. For example, If you receive unemployment compensation, you typically have to go online to print that out. You will not receive that in the mail. Note that many states require residents to go to a portal to print the 1099-G, which summarizes unemployment dollars received and certain other government compensation, such as state and local tax refunds. For charitable contributions of $250 or more, you need a written acknowledgment from the nonprofit. If the organization did not send the letter yet, or you’ve lost it, now is the time to contact the charity to request a copy.
If you got divorced in 2021, your preparer will want a copy of the divorce decree, Ford says. The decree can contain important information, such as which parent can claim any dependent children that year, she says.
6. Check your stimulus check
If you received a third Economic Impact Payment, or stimulus check, in 2022, you may need that information to determine if you can claim a larger amount. If you received no stimulus check, you may be able to claim the credit on your 2022 return. Here’s why. You may be owed more stimulus money if the government’s calculation was based on your 2021 tax return — or your 2020 tax return if your 2021 filing was not processed when determining your eligibility — and your situation changed in 2022. For example, your income may have been lower in 2022.
If the taxpayer received a stimulus payment and doesn’t report the correct amount on the return, it could delay the processing of any refund or even require the filing of an amended return.
If you want to have more detail or you need guidance through your tax filing we are available to help you.
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